Signs of a Washington Paradigm Shift

The credit union narrative on Capitol Hill can be mind-numbingly repetitive.

Every two years we get the same member business lending and supplemental capital bills and face the same tax exemption fight. All to the steady drum, drum, drum of regulatory relief.

But last week, our old dog trades tried some promising and refreshing new tricks.

H.R. 5061, which would amend the Federal Credit Union Act to exclude veterans’ loans from the member business lending cap, is a prime example of this paradigm shift. The bill was sponsored by Rep. Jeff Miller (R-Fla.), chairman of the House Veterans Affairs Committee.

Given banker opposition, the odds aren't very good that credit unions will be successful in raising the member business lending cap to 27.5% of assets. Heck, I know a lot of credit union leaders that don't support the initiative, and none of them are named Stuart Perlitsh.

But chipping away at the cap by legislating exceptions to the rule?

And evoking the sound bite power of helping veterans in an election year?

Brilliant!

It's unlikely much will be accomplished in Congress in the four months that remain before mid-term elections. But looking toward the next Congress, I’d say this idea has some legs.

Who doesn't want to help veterans? Not an elected official or congressional hopeful.

Not even the banking lobby is that heartless.

Read what Miller wrote in his recent Washington update, delivered via email to his constituents.

“Once our men and women hang up the uniform, they possess very unique skill sets and leadership traits which can be of great value in the private sector. Currently, credit unions are only able to lend members 12.25% of the institution's assets. This legislation would exempt qualified veterans from that definition and provide greater access to capital for veterans looking to start a small business or pursue other entrepreneurial endeavors. Veterans have proven themselves as talented leaders, and this legislation is just one more step towards showing our appreciation and faith in their abilities,” he wrote.

That there is some fine politicking.

Kudos to the League of Southeastern Credit Unions for teaming up with Miller's office to create this fresh new approach to the MBL cap fight. Miller has been a steadfast supporter of credit unions, supporting Rep. Ed Royce when the California Republican introduced and reintroduced bills to raise the MBL cap.

Another bright idea that emerged in Washington last week was the coordinated testimony of CUNA and NAFCU witnesses during the July 15 House Financial Services subcommittee hearing on regulatory relief proposals for community financial institutions.

Both credit union executives told the subcommittee they would like to add the NCUA and its risk-based capital proposal to H.R. 4042, the Community Bank Mortgage Servicing Asset Capital Requirements Study Act. Introduced by Rep. Blake Luetkemeyer (R-Mo.), the bill would require the completion of a study to determine risk-based capital requirements for mortgage servicing assets.

Bankers are further along than credit unions in their risk-based capital fight, and this bill specifically targets a risk weight they find onerous.

Piggybacking onto this bill seems pretty smart. If successful, the bill wouldn't kill the rule, but it would significantly delay its implementation. That would give the trades more time to fight what they don't like, and give credit unions more time to get their balance sheets into compliance.

Community bankers are on an advocacy roll. They were successful in convincing Sen. David Vitter (R-La.), a member of the Senate Banking Committee, to file an amendment to the Terrorist Risk Insurance Act that would require the Federal Reserve Board to include at least one community banking member.

Fed Chair Janet Yellen told the committee July 15 she doesn't support the bill, although she also said she doesn't oppose the idea of a community banker on the board. The Senate passed the bill despite Yellen's opposition, which I think will further elevate community banker influence on Capitol Hill.

Credit unions haven't had much success passing legislation that bankers oppose. But when credit unions join forces with community banks, particularly when it comes to shared regulatory relief interests, both sides have been far more successful.